Abstract

Background
Starting in J anuary 2010, Shell and PetroChina have been evaluating an area of J oint Cooperation in the Sichuan Basin, China
with the goal to explore, appraise, and ultimately develop a Shale Gas opportunity. The area of interest covers some 3500 km
2

in largely agricultural, hilly terrain. Since project inception, two vertical and three horizontal wells have been drilled and
hydraulically fractured, demonstrating the lateral pervasiveness of the Lower Silurian Longmaxi Formation shale and the flow
of gas to surface in each of the wells. An extensive data gathering and evaluation programme has been executed. Core and log
data, engineering data and fluid samples have been collected and analysed. Microseismic monitoring of a 9-stage fracturing
treatment horizontal well using deep and shallow instrument wells has also been trialled with good results. This programme is
the most advanced foreign co-operation shale gas project in China to date.

Hydrocarbons stored in ultra-low permeability reservoirs have a high level of strategic significance in China for various
reasons:
i) The shale gas revolution in North America has greatly influenced the energy balance there;
ii) China shale gas resources are estimated by many to be as high or greater than the USA, although uncertainty is
very high and there are no shale resources currently under commercial production;
iii) China has a growing energy demand overall;
iv) Natural gas, a clean fuel, currently comprises a relatively small share of the countrys energy mix;
v) China leadership has reportedly targeted shale gas production of 6.5 bcm/yr by 2015 and introduced price
incentives to help encourage its rapid development.

As a subset of the total China estimated resource base, it has been estimated that the amount of shale gas resource in the
Cambrian- and Silurian-age strata within the Sichuan Basin is 1.5 to 2.5 times that of conventional resources (Yongqiang et al.,
2012). If correct, this is a very significant potential to be developed. However, there are many challenges for developing
hydrocarbons stored in ultra-low permeability reservoirs in general, and Sichuan potential shale resources in particular.

First, such low permeability reservoirs will not produce at commercial rates without treatment to create higher-permeability
connections to the wellbore. Hydraulic fracturing accomplishes this goal but is expensive and requires technical sophistication
to plan and then good expertise to execute effective stimulation. Second, for most resource configurations the reservoir is best
developed with long horizontal wells and multiple fracture stages in order to create a large stimulated rock volume around
each well. Horizontal wells are more difficult to drill, including steering of the drill bit to stay in the preferred zone. If the
resource has high structural complexity, this issue is especially difficult. Third, the small stimulated rock volume around each
wellbore (i.e. a relatively small drainage area), plus low matrix porosities (3-10%) combine to give modest ultimate well
recoveries compared to conventional projects with similar reservoir pressures. Fourth, the small drainage area leads to a
requirement for hundreds of wells which consequently results in a high development cost and more significant footprint.


IPTC 16855
Pioneering Shale Gas in China: China Sichuan Shale Gas Joint
Cooperation Project
Dr Nick Feast, Shell China Exploration and Production Company, Chengdu; Dr Claudia J . Hackbarth, Shell
Exploration and Production Company, Houston; Huang Yuzhen, PetroChina Foreign Cooperation Administration
Department, Beijing; Chen Gengshen, PetroChina Southwest Oil and Gasfield Company, Chengdu
Copyright 2013, International Petroleum Technology Conference

This paper was prepared for presentation at the International Petroleum Technology Conference held in Beijing, China, 2628 March 2013.

This paper was selected for presentation by an IPTC Programme Committee following review of information contained in an abstract submitted by the author(s). Contents of the paper, as
presented, have not been reviewed by the International Petroleum Technology Conference and are subject to correction by the author(s). The material, as presented, does not necessarily
reflect any position of the International Petroleum Technology Conference, its officers, or members. Papers presented at IPTC are subject to publication review by Sponsor Society
Committees of IPTC. Electronic reproduction, distribution, or storage of any part of this paper for commercial purposes without the written consent of the International Petroleum Technology
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acknowledgment of where and by whom the paper was presented. Write Librarian, IPTC, P.O. Box 833836, Richardson, TX 75083-3836, U.S.A., fax +1-972-952-9435


2 IPTC 16855
In China, geological and surficial conditions will need to be proven favourable for economic development. Mountainous
terrain and corresponding subsurface structural complexity, coupled with high population density, impose additional
challenges compared to most existing shale gas developments in North America. On the logistical and economic side, there
may be additional challenges of an immature fracture stimulation support industry, roads not built for heavy traffic and large
vehicles in rural areas, and the uncertainty of a regulatory and price environment that is still under construction.

To create a successful Unconventional gas and oil industry in China, strong partnerships are needed in every combination.
This includes resource holders, regulatory bodies, local governments, communities, partners, service and material suppliers,
universities, and research institutions. Not to be overlooked is the need to educate and train a workforce with the unique skills
applicable to Unconventional hydrocarbon projects. If subsurface conditions are capable of supporting an Unconventionals
industry, the development benefits both economically and environmentally can be large.


Sichuan Shale Joint Cooperation Project, PetroChina and Shell

The Sichuan Shale cooperation project has achieved its goals of the first phase. These included achieving >3 years Lost Time
Injury (LTI) free, spudding the first exploratory well within a year of project inception, demonstrating the technical basis for a
shale gas venture, and transferring North American and China (Changbei) field development best practice into the project
team. The first vertical well with a two-stage hydraulic fracture stimulation tested at a stable rate of 60 000 m
3
/d, while a
subsequent horizontal was successfully completed with a 9-stage stimulation and tested at a rate of 430 000 m
3
/d.

Key focus areas for safety management include road safety, contractor safety management, safety leadership, worksite hazard
management and process safety. In addition, a major cultural change programme of behavioural-based safety is underway and
will underpin a programme of continuous improvement required to achieve and sustain a high level of safety performance.

The key technical objectives of the initial five-well programme were to:
i. Determine the presence and lateral continuity of shale gas and assess the degree of the charge retention of the basal
part of the Longmaxi Shale and underlying Baotao Limestone;
ii. Gather subsurface lithological data, including continuous core to calibrate wireline logs;
iii. Gather engineering data on drilling and fracture stimulation performance, and subsurface pressures;
iv. Determine the producibility/flow rate of the gas, if it is present.

Structural complexity and subsurface uncertainty are currently high, with sparse 2D seismic data of numerous different
vintages and very few prior Base Longmaxi and Baotao well penetrations. The high-gamma ray interval at the base of the
Longmaxi shale interval was proved correlateable across the area of evaluation, but sub-regional differences in facies,
thickness and reservoir properties are evident even with the limited data to date. The characteristics of the basal Longmaxi
shale include low porosity and permeability but good fraccability and abundant pre-existing natural fractures. The joint
cooperation area within which we are evaluating the Longmaxi is structurally complex, therefore with a variable stress
distribution in both direction and magnitude. The contained hydrocarbons are dry gas with no detectable H
2
S; the target
interval is highly overpressured.

Long term extended test data are required to better understand the overall well performance and ultimate recovery per well to
be expected from full development. This is turn informs field development concept selection, i.e. number, type, and layout of
wells and their associated infrastructure placement and sizing.

A play-based exploration methodology has been employed to focus on the key uncertainties first, characterize different so-
called play segments, and execute a robust data acquisition programme. This is helping to rank the better and lesser portions
of the joint cooperation area and drives subsequent decision-making. At the same time, early exploration is laying the data-
based groundwork for a future full-field development programme which will be executed in phases. Vertical wells have
provided whole cores, extensive logging data, and reservoir pressures from DFIT and downhole surveys. Focused Ion Beam
(FIB) Scanning Electron Microscopy has been employed on core plugs with the aim of visualizing and and quantifying the
nano-scale pore network, assessing hydrocarbon storage capacity and pore connectivity and calibrating petrophysically derived
reservoir properties. The stratigraphy and depositional environment were investigated with chemostratigraphy on drill
cuttings.

Given the intense and active deformational setting of the Sichuan Basin, the Longmaxi Formation may exhibit anisotropic
subsurface stresses congruent with regional stress patterns, or possibly, significant local variation depending on whether a
given well penetrates a crest, flank, or syncline of a fold (Hackbarth et al., 2011). In terms of reservoir pressures, early
indications from drilling data, DFIT and well tests are that there exist good overpressures in some areas. Mudrocks (shales)
are typically highly laminated and contain preferentially-oriented micro-structural features that result in mechanical
IPTC 16855 3
anisotropy. This complicates their analysis for fracture stimulation design compared to tight sand reservoirs, such that
additional geomechanical parameters must be determined.

Various drilling-related techniques have been employed or evaluated in order to improve operational performance and
efficiency as well as implement best practices. These techniques included managed pressure drilling, advanced waste
management (with synthetic-based mud cuttings incinerated) and pitless drilling. As this was an unfamiliar area for the early
exploratory wells, great care was taken to avoid potential subsurface hazards such as shallow gas, shallow depleted intervals,
H
2
S-bearing zones, areas of geological complexity, poorly imaged areas and major fault zones. In exploratory shale gas areas
which are structurally complex and only have sparse 2D data coverage, additional emphasis needs to be placed on positioning
the horizontal wells, as these have greater challenge than in a development phase where 3D seismic is typically available.
Well based seismic techniques have been explored for this purpose.

In this project, geomechanical properties have also been derived and integrated with additional data such as image and sonic
logs and used as a basis for frac design. Hydraulic fracture stimulation designs for the project have included low vicosity
water with proppant and gel for friction reduction in a limited entry design. In each case, the planned design was validated
and/or adjusted just before execution using results from Diagnostic Fracture Injection Tests (DFITs) immediately prior to
stimulation. Hydraulic fracture execution is challenging in the area because of high wellhead treating pressure due to high
formation stress and pore pressure. Overall, the procedure followed the plug and perf design with coiled tubing sand jetting
and milling out of all plugs prior to commingled flow back for testing. Production logging gave insights on inflow from the
various perforation clusters.

More specifically, two frac stages were placed in the two vertical wells. In the first well, some 2200 m3 of fluid was used,
combined with 72 thousand tonnes of proppant at a maximum pump rate of about 55 bpm. The maximum pressure reached
was 12500 psi. In the three subsequent horizontal wells, the number of stages ranged from five to nine. Fluids were at least
partially recycled. Further work is ongoing to optimize frac parameters for future well stimulations; experience gained from
operations in North America has been and will continue to be applied to the evaluation execution of this opportunity. The twin
goals are to improve well ultimate recovery while also optimizing fluid and proppant usage.

During well hydraulic fracturing operations for one well, a new approach for well-based monitoring of microseismic events
from multiple monitoring points was tested and is described in more detail elsewhere (Dwan et al., 2013). In summary, the
redistribution of earth stresses around a growing hydraulic fracture causes the surrounding rock to fracture and thus emit very
faint sounds. In the study area, these microseismic events generated by hydraulic stimulation in a horizontal well were sensed
from one adjacent vertical well at a depth of >3500m, and 3 shallow instrumented boreholes drilled just for this purpose.
Using the four sets of observer data the time, depth, and x,y location of the microseismic events could be calculated with good
accuracy.






Figure 1. Geometry of horizontal well with relation to Longmaxi Shale Layers and vertical well. The horizontal well was
subject to 9-stage hydraulic fracturing treatment and microseismic monitoring undertaken using the vertical observation wells
as well as 3 shallow instrumented wells.


The results of this work have yielded vital insights regarding fracture geometries, which will be used for optimizing future
well design. In particular, the data suggest the presence of frac barriers which contain vertical frac growth to within the shale,
although there is potential for natural fractures to weaken the effectiveness of these frac barriers. The data also suggest a
4 IPTC 16855
complex fracture pattern consistent with the patterns described elsewhere within the basin (Fu Yongqiang et al., 2011). The
microseismic interpretation indicates weak stress anisotropy at that location, but strong interaction between the main hydraulic
fracture and pre-existing natural fractures/ planes of weakness. All these observations are very helpful in interpreting the
stimulated rock volume (SRV) which in turn strongly influences well initial rate and the ultimate recoverable volume from
each well. Geomechanics plays a critical role in determining subsurface stress field, identifying brittle and fraccable shale
intervals and predicting natural fracture network in a structurally complex setting. (Yuan et al., 2013). Further work will
incorporate newly acquired data to further enhance reservoir characterization and refine and develop new geomechanical
models.

Finally, it is important to note that the operating environment in the Sichuan Basin consists of densely-populated, intensively-
farmed agricultural land. Non-technical risks arising from land use, permitting processes and interactions with the community
are significant for developments where many hundreds of wells are expected to be drilled. Management of these will be
critical to the development of Chinas shale gas resource base. However, with good operational practices, shale gas operations
can bring noticeable benefits to local communities. In this respect, Shell uses its global onshore operating principles to guide
operational activities. These focus on the following principles i) Safety and Well Integrity, ii) groundwater protection and
water re-use, iii) protection of air quality, iv) minimized operational footprint, v) positive interactions with local communities.
During the initial evaluation period, we engaged with local communities to understand any issues or concerns as a result of
operations and looked for opportunities to provide local benefits such as employment or improved road conditions. One such
example included supporting the farming community with pumps, hoses and personnel during a low-rainfall period when
irrigation was needed. We generally received good support from local communities during operations to date. The learnings
gained from this initial evaluation will be incorporated into any future development planning.

Technical Summary
The basal Longmaxi Silurian Shale appears to be ubiquitous in the study area, southern Sichuan Basin. While
exhibiting regional variability, it is proven to have the potential to flow gas to the surface at a significant rate.
The Sichuan study area is structurally complex. Well and core measurements to date indicate weak stress anisotropy,
but strong interaction between hydraulic fractures and pre-existing natural fractures.
Hydraulic fracturing has been successful in stimulating the flow of gas at encouraging rates.
A microseismic trial has highlighted good rock properties for microseismic monitoring and has demonstrated the
potential to use a shallow well based monitoring technique
Analysis of microseismic results has yielded insights into the geometry and pattern of fracture stimulation. The
importance of pre-existing natural fractures has been demonstrated. Estimates of stimulated rock volume, frac
containment and stage interference drawn from these data will be used to refine future well completion design.
Results from the first five-well programme, plus continued application of insights from North American
unconventionals projects, will be used to progress the evaluation of this opportunity.



References

Claudia J . Hackbarth, Danny Soo, and Navpreet Singh, 2011. Sichuan Basin Shale Gas, China: Exploring the Lower Silurian
Longmaxi Shale. International Petroleum Technology Conference Bangkok, Thailand, 1517 November 2011.

F.S. Dwan, J . Qiu, M. Zhou, R.S. Yuan, I. Zhang, L. J in, S. Wang, X. Li, M. Lin, B. Liang, C. Deng, S.Liang, R. V. Dok, L.
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